US Policy Support Fails to Halt Rising Bond Yields

A fresh round of US policy support aimed at containing long-term Treasury yields is likely to prevent a further sharp rise in borrowing costs, but may not be enough to drive yields materially lower, according to BofA Securities. The brokerage warned that if policymakers fail to pull the 30-year Treasury yield below the critical 5% level, markets could face a weaker US dollar and a shift away from leveraged risk assets.

The US administration is increasingly focused on preventing a rise in long-term borrowing costs from undermining government financing and the AI investment boom. The US Treasury has doubled the size of its long-end bond buybacks, following earlier measures including dollar swap lines with Asian and Gulf economies and intervention to support the yen.

BofA described these steps as a growing policy effort to 'fix' the fixed-income market, arguing that they should cap, but not necessarily reduce, US bond yields. The US national debt has crossed $40 trillion, while net Treasury issuance is expected at around $2 trillion across 2026 and 2027.